Moscow Times
May 10, 2007
Week of Gas Talks for Putin in Central Asia
By Miriam Elder
Staff Writer
Securing gas supplies from Turkmenistan's new leadership and the construction of a gas pipeline along the Caspian shore are set to dominate President Vladimir Putin's weeklong trip to Central Asia starting Thursday.
Putin is due to hold talks with Kazakh President Nursultan Nazarbayev in Astana on Thursday, before the two leaders travel to Turkmenistan for an informal summit with Turkmen President Gurbanguly Berdymukhammedov.
Moscow faces steep competition from the United States, the European Union and China for Turkmenistan's potentially huge gas reserves, which were mainly closed to foreign companies under the presidency of Saparmurat Niyazov, who died in December.
Putin's three-day visit to Turkmenistan will start Thursday in Ashgabat, the Kremlin press service said.
Putin, Nazarbayev and Berdymukhammedov are then due to hold talks in the Caspian post of Turkmenbashi, a city known as Krasnovodsk in Soviet times. It was later renamed Turkmenbashi in honor of the eccentric, late Turkmen president who adopted the moniker, meaning "Father of all Turkmen."
Foreign state and company officials have been flocking to the country since Niyazov's death, hoping to win a role in developing the country's energy reserves as the new leadership gives signals it will be more open to outside participation.
State-run Gazprom relies on Turkmen gas to fulfill its supply contracts, as production at home stagnates and energy demand across Europe grows. A Gazprom spokeswoman said a Gazprom official would likely accompany Putin on his trip, but declined to identify him.
Ahead of Putin's visit, Industry and Energy Minister Viktor Khristenko met with Nazarbayev in Astana on Wednesday, Interfax reported.
"Central Asia is one of the most important parts of our energy policy," Khristenko's deputy Andrei Reus told a Moscow news conference Tuesday. "Kazakhstan and Turkmenistan play a key role," he said.
When asked whether the three leaders would discuss a proposed pipeline that would skirt the Caspian Sea to bring Turkmen gas through Kazakhstan to Russia, Reus said, "All sides are ready to discuss this question."
Yet a pipeline deal with Turkmenistan is far from certain. Deputy Economic Development and Trade Minister Vitaly Savelyov told the same news conference that while Putin and Nazarbayev were due to sign seven agreements during their meetings in Kazakhstan, none were expected during Putin's visit to Turkmenistan.
"[Turkmenistan] makes its own economic and political decisions," Reus said. "It has such major resources that it can choose various routes, depending on what is in its best economic interest," he said.
China, the EU and the United States are all eager to get a slice of Turkmenistan's gas reserves, estimated at 2.9 trillion cubic meters by the 2006 BP Statistical Review. Turkmen leaders have claimed the country holds up to 10 times that amount.
In April 2005, Niyazov blessed the construction of a pipeline to China, with plans to send 30 billion cubic meters of gas to the energy-hungry nation starting in 2009.
The United States and the European Union, meanwhile, still hope that Berdymukhammedov will consider a long-standing proposal to build a gas pipeline under the Caspian Sea to Azerbaijan. Such a pipeline would link up to an existing pipeline to Turkey and bypass Russia.
Martha Brill Olcott, a senior associate at the Carnegie Endowment for International Peace in Washington, said that a deal with Russia "should kill" the idea of a trans-Caspian pipeline.
Turkmenistan would "try to maintain negotiations with the Europeans, but it raises the threshold for accepting it," she said.
"The Turkmens are making lots of promises to lots of people, but it looks like Russia can still exert the greatest leverage on the process," said Alexander Kliment, an analyst at Eurasia Group, a Washington-based risk consultancy.
Reus and Savelyov hinted that Russia's long-standing ties with Turkmenistan should give it an edge in energy talks.
"We have worked together long enough, regarding infrastructure and so on. We can offer things that help the country use its resources," Reus said.
"The Turkmens are going to continue to keep their options open as much as they can in the face of immense Russian pressure," Kliment said. "They need a tremendous amount of foreign investment to continue to boost gas production and exports in line with their extravagant promises."
Putin is also eager to win a firm commitment from Berdymukhammedov to a 25-year gas deal signed by Niyazov in 2003. During a visit to Moscow last month, Berdymukhammedov indicated that he would honor his predecessor's deal, which commits the bulk of Turkmen gas exports to Gazprom.
In 2006, 39 bcm of Turkmen gas transited Russia, and that figure is due to rise to more than 50 bcm this year, Reus said.
Talks would extend beyond oil and gas, Savelyov said. Cooperation in electricity, transport, and atomic energy would also figure on the agenda, he said.
Savelyov bemoaned the low level of bilateral trade with Turkmenistan, whose economy remains underdeveloped after decades of Niyazov's hermit rule. Moscow would examine "how to bring more dynamism and strength to our economic relationship," he said.
Russia's trade with Kazakhstan has tripled over the last five years, Savelyov said, with exports valued at $9 billion in 2006, making the country Russia's 14th-largest trading partner. Trade with Turkmenistan, meanwhile, stood at just $307 million.
The Kremlin press service declined to elaborate on the unusual scheduling of Putin's trip. He was due to leave for Astana on Wednesday, travel to Ashgabat on Thursday and then return to Kazakhstan, this time to Aktau, the center of the country's oil industry, on Saturday, before returning to Moscow on Tuesday.
"The length of the trip, for a Russian president who doesn't often leave the country for so long, reflects the importance the Kremlin places on these relationships," Kliment said.
Among the deals expected in Kazakhstan are the establishment of a uranium enrichment center there and of trade missions in Russia and Kazakhstan, Savelyov said. Kazakhstan's position as a potential transit country for Russian electricity would also be discussed, he said.
A proposed customs union among Russia, Kazakhstan and Belarus -- to be formed after Russia and Kazakhstan join the World Trade Organization -- would also be discussed, he said.
Olcott said the three-way summit could see the Russians and Kazakhs working closely together to bring the Turkmens on side.
"We see emerging a strategy where the Russians and the Kazakhs are, to their mutual benefit, working to tie up long-term transport of Turkmen gas," she said. "We see a change in the relationship."
If the pipeline deal is agreed on, Kazakhstan's share of transit revenue would soar, easing many tensions in the countries' relations, she said.